Tuesday, April 9 2019 01:22

ArmInfo. The former head of the Armenian Ministry of Finance, Vardan Aramyan, calls on the Armenian government to be more careful in its public promises and in planning  current budget expenditures.

Earlier, the Armenian government, based on the over-fulfillment of  the program indicator of tax collection in the first quarter of this  year by 11.4 billion drams, said it had revised its forecasts related  to tax revenues in 2019 with up to 40 billion increase. As a result,  the Cabinet of Ministers made a decision to increase the monetary  allowances for servicemen from July 1, 2019, and from September 1 of  this year - salaries to teachers.

In an interview with ArmInfo correspondent, Aramyan agreed that  pensioners should receive a decent pension, and civil servants a  decent motivational salary. But it is equally important that the  sources of funding for these costs be stable, long-term and supported  by sustainable economic growth.

The expert recalled that by the end of 2018, Armenia recorded a 5.2%  growth in GDP, which is a good result even on a regional scale, but  experts are concerned by the structure of this growth. In 2018, as in  the past few years, the non-production sector carried the main  "burden" for ensuring growth, while the dominant share was held by  the service sector (from 14.4% in 2017 to 18.8% in 2018) and the  trading sector (slowed growth from 14% to 8.7%). At the same time, in  the  year-over-year terms, only the service sector remained in the  drivers, while the industrial sector maintained low growth rates  (slowed growth from 12.6% to 4.3%).

"We are constantly talking about export-oriented economic policy,  meanwhile we are registering a significant decline in export growth  rates. In 2018, exports grew by 7.8% (in 2017, growth was 25.2% - ed.   note). In conditions when in overall economic growth the dominant  value was provided by "leisure-culture- services"; one can speak  about efficient economic growth only considering a whole number of  factors, "the expert said.  Meanwhile, according to Aramyan, such  promises of the government may form special expectations among the  population. Should they be given when, on the one hand, there are  risks ensuring this growth, and on the other hand, there are rising  operating costs that can lead to certain problems in the conduct of  economic policy. "The government in this issue should be especially  cautious. It is another matter if the Cabinet of Ministers was  confident that the real sector and, accordingly, export will be the  leader in ensuring the forecasted growth in 2019. Then, along with  the tax authorities' efforts to improve tax administration and reduce  the shadow sector , the authorities would be able to provide the  desired results, capable of consistently financing current  expenditures, "he said.

Nevertheless, today, as when he was finance minister, Vardan Aramyan  adheres to the following position:  before taking on new obligations  for social expenditures - pensions and salaries, you need to make  sure that the structure of economic growth is effective. To undertake  such obligations in advance is fraught with negative social and  economic consequences, the expert notes. "If this policy suddenly  fails, no matter how much we improve tax administration and collect  taxes, the economy will not be able to generate revenues and thus  bring returns. In this case, focusing only on tax collection,  economic authorities will begin to draw liquidity from economy,  without the presence of compensating factors for the growth of its  efficiency. In addition, if last year's extremely constraining  scenario of fiscal policy (reduction of capital expenditures, as a  result of which credit program fulfillment indicator was met only by  50-60% - ed. note), then the negative consequences of this will be  noticeable after a certain time lag - one or two years later, when  the economy will noticeably feel this . Thus, as  Aramyan stressed, in order the increase in social expenditures is not  accompanied by economic shakiness and turbulence, one must be sure  that new, additional and long-term state budget revenues can be  provided.  To recall, the former government of Armenia has repeatedly  stated that under current conditions, increasing pensions and the  minimum wage mean a risk of increasing the country's debt burden.  Meanwhile, pensions and wages in Armenia have not increased since  2015. On February 12, 2018, Atom Janjughazyan, the former deputy  minister of finance and now the head of the Ministry of Finance, said  that it would be adventurism to raise pensions without having a solid  economic basis and reliable sources of financing. He noted that "I  would not like to return to the practice of those years when the  figures on the paper were increased, but in reality there were no  resources for corresponding payments."